Global Market Updates
• Another downgrading move was made by S&P Global on the long-term credit ratings of several US bank stocks, as they weigh that the aggressive FFR hikes have taken its effect on banking liquidities, with the higher-for-longer outlook to fuel concerns on future towering funding costs and real estate crisis.
• Wall Street indexes, as a result, was weighed down by bank stocks but got propped up by tech’s gains (DJI down by -0.51%, S&P 500 slipped -0.28% and Nasdaq up by +0.06%).
• US Jul existing home sales which fell -2.2% to 4.07mn (vs consensus of 4.15mn) indicates mounting mortgage pressures from high rates, and will most likely carry onwards to 2024.
• The longer termed US Treasuries regained momentum Tuesday, with 10-year UST yield remaining muted at 4.34%, whereas the 2-year UST yield rose another c. 5 bps hike to 5.02%, possibly pointing to investors anticipation/brace ahead of a perceived hard-landing. Global bonds followed suit: 10-year German bunds fell 6 bps to 2.65%, 10-year UK gilt slipped 5 bps to 4.65% while the Japanese GB gained 0.1 bps to reach 0.67%.
• Market participants, according to CME’s Fedwatch tool, are expecting a rate hold in Sep-23’s FOMC meeting, while still considering a rate hike possibility of 38.7% in Nov-23’s meeting.
Domestic Market Updates
• Indonesian Tuesday benchmark series of LCY government bonds lowered further Tuesday, with the 10-year benchmark series’ (FR0096) yield gaining another c. 5 bps to reach 6.65%.
• The IDR stood flat against the USD (USD/IDR ticked down -0.07%) in line with muted 10-year UST movements Tuesday.
• The government securities auction yesterday featured a new issuance FR0100 as the candidate 10-year LCY government bond benchmark series for 2024, and already it was greeted with investors’ eagerness, raking in the highest bids of IDR19.5tn (56% of total incoming bids) and awarded bids of IDR6.7tn.
• Overall, total bids rose to IDR34.6tn from last auction’s IDR32.5tn, which we believe is underpinned by the discounted prices in the benchmark series as well as due to the alluring new 10-year benchmark issuance.
• This was well reflected in yesterday’s foreign inflow that rose, with the total bids reaching IDR5.63tn (vs previous auction’s IDR4.49tn) and 77.1% of the bids aimed at the new FR0100.
• Moreover, we saw increased transaction volumes in the discounted benchmark series, particularly FR0096, FR0098 and FR0098 series.
Market Forecast
• Given the recent developments that unfolded within the global and domestic markets, we expect the 10 year Indo GB yield to move within the range of 6.55-6.65% for today.
• Attractive Indo GB series to be traded today : FR0070, FR0082, FR0087, FR0096, FR0100
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